$MBG.DE (Mercedes-Benz Group AG) ๐๐๐ ๐๐ฎ๐น๐๐ฎ๐๐ถ๐ผ๐ป ๐บ๐ผ๐ฑ๐ฒ๐น
Today I am presenting Mercedesโ intrinsic valuation - a company that does not require a presentation.
The market has been pricing MBG.DE like itโs stuck in reverse. My DCF valuation suggests the stock still has potential for a knowledgeable investor.
๐๐ฒ๐ ๐ฎ๐๐๐๐บ๐ฝ๐๐ถ๐ผ๐ป๐:
1. Explicit 5Y/5Y growth @ 2%/1%
2. Long-term growth in perpetuity @ 1%
3. Margin expansion by circa 1.5% in Y10.
4. WACC @ 5.8%.
5. An EBITDA exit multiple of 7.1
6. Tax rate 25%
7. The input that drives reinvestment is the most recent Sales to Capital ratio = 0.77
๐๐ถ๐๐๐ผ๐ฟ๐ถ๐ฐ ๐๐ฟ๐ผ๐๐๐ต (๐ณ๐ผ๐ฟ ๐ฐ๐ผ๐ป๐๐ฒ๐ ๐)
MBG 10Y CAGR revenue declined by 1% on average, and the decline accelerated in 2024 and 2025, with revenue down 4% and 9%, respectively. During Annual Results Conference 2025 management issued guidance of flat revenue and โsignificantly above the prior-year levelโ EBIT for 2026. Given there was no precise figure we can use, I cross checked to analysts estimates. For 2026 they expect EBITDA of 14.5M. In our model, I use slightly lower EBITDA for prudency purposes. My revenue growth assumptions are driven by persistent competition and weakness in China sales. Interesting enough, if higher growth is being used, intrinsic value goes down. That is because of MBGโs has low sales-to-capital ratio, which decreased from 0.79 in 2016 to 0.59 in 2025. The industry average is much higher at 1.5.
๐ฅ๐ฒ๐น๐ฎ๐๐ถ๐๐ฒ ๐๐ฎ๐น๐๐ฎ๐๐ถ๐ผ๐ป
Current TEV/EBITDA is currently stands at 5.5, which is below historical average (although justified to some extent). P/B also remains below 5Y average, and I believe this is a reflection of what the market thinks about decreasing ROIC and declining revenues - a combination which is usually driving value. Shareholders' returns reflect a grim story โ Mercedes underperforming SPX index on all timeframes, including YTD -14% stock return.
๐๐ฎ๐๐ฒ ๐ฐ๐ฎ๐๐ฒ
My intrinsic value for Mercedes is 74 EUR. Valuation suggests that the stock is trading at 30% discount to fair value. If adjusted to FV within 3 years, it will generate 12% in annual alpha. Here is why re-rating can work out:
* Mix shift toward high-margin models holds up
* Premium ICE cash flows can last longer than the market expects
* Flexed capex + disciplined EV strategy
* Shareholder yield is unusually strong
* China exposure looks worse in headlines than it turns out
* Multiple decompression if execution goes well
* Luxury brand value provides downside protection
* Capital allocation discipline is now part of the strategy
In my view, management should clearly focus on improving efficiency to achieve higher margins and ROIC going forward, rather than chasing growth. This focus will deliver better shareholder returns going forward (as further confirmed in the sensitivity analyses shared below). As Prof. Damodaran mentioned in his speech at the Nordic Business Forum:
โJust as human beings don't like to age, companies don't like to get old. focus of a company needs to change as it moves through the lifecycle from startup to growth and maturity/declining. More value is destroyed around the world by companies not acting their age: young companies that try to act old and old companies trying to be young again and there's an entire ecosystem that feeds these companies. Companies need to live up to their age.โ
๐๐ผ๐ป๐ฐ๐น๐๐๐ถ๐ผ๐ป
Even though there seems to be a meaningful discount to FV, I am not a buyer here. The auto industry rarely demonstrates long-term value creation, and MBG is no exception. I prefer wide moat companies trading at fair value, rather than average companies trading at a discount. This philosophy is embedded in my stock selection.
Keep in mind that this is an estimate - just like any DCF model. Iโm not claiming perfection, but I do trust these calculations to guide my own investments. Hopefully, they can help inform yours as well.
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๐๐ช๐ด๐ค๐ญ๐ข๐ช๐ฎ๐ฆ๐ณ: ๐๐ฉ๐ช๐ด ๐ฑ๐ฐ๐ด๐ต ๐ช๐ด ๐ง๐ฐ๐ณ ๐ช๐ฏ๐ง๐ฐ๐ณ๐ฎ๐ข๐ต๐ช๐ฐ๐ฏ๐ข๐ญ ๐ข๐ฏ๐ฅ ๐ฆ๐ฅ๐ถ๐ค๐ข๐ต๐ช๐ฐ๐ฏ๐ข๐ญ ๐ฑ๐ถ๐ณ๐ฑ๐ฐ๐ด๐ฆ๐ด ๐ฐ๐ฏ๐ญ๐บ. ๐ ๐ฅ๐ฐ ๐ฏ๐ฐ๐ต ๐ฐ๐ธ๐ฏ ๐ด๐ฉ๐ข๐ณ๐ฆ๐ด ๐ช๐ฏ ๐๐๐ ๐ฃ๐ถ๐ต ๐ค๐ข๐ฏ ๐ฃ๐ถ๐บ/๐ด๐ฆ๐ญ๐ญ ๐ต๐ฉ๐ฆ๐ฎ ๐ข๐ต ๐ข๐ฏ๐บ ๐ต๐ช๐ฎ๐ฆ ๐ข๐ง๐ต๐ฆ๐ณ ๐ต๐ฉ๐ช๐ด ๐ฑ๐ฐ๐ด๐ต ๐ช๐ด ๐ฑ๐ถ๐ฃ๐ญ๐ช๐ด๐ฉ๐ฆ๐ฅ. ๐๐ฐ๐ต ๐ง๐ช๐ฏ๐ข๐ฏ๐ค๐ช๐ข๐ญ ๐ข๐ฅ๐ท๐ช๐ค๐ฆ. ๐๐ฐ ๐บ๐ฐ๐ถ๐ณ ๐ฐ๐ธ๐ฏ ๐ณ๐ฆ๐ด๐ฆ๐ข๐ณ๐ค๐ฉ.... Show More
Not investment advice. The author may have financial interests in the mentioned instruments.
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Fri May 15 2026 01:19:57 GMT+0000 (Coordinated Universal Time)
